This Feedback Statement follows the Call for Input (CfI) that was issued in November last year. The CfI asked for views and evidence on potential areas of concern in the high-cost credit sector, including overdrafts. It also sought evidence relevant to the FCA-review of the price cap set in 2015 on high-cost short-term credit (HCSTC).
In this paper, the FCA set out its decision to maintain the price cap on HCSTC at its current level. That decision is based on the results of the analysis which are presented in this paper, which indicate the cap and other regulatory measures have been a success. The authors also commit to review the level of the cap again in three years’ time to ensure that it remains effective as the market develops.
The FCA also set out its priorities for the next stage of the FCA-review of the high-cost credit sector. This includes an examination of both sector-wide issues and certain product-specific concerns.
Across the sector, there has been a consistent pattern of high-cost credit consumers’ credit ratings getting worse over time as they use the high-cost credit products. This will be examined to understand both why this happens and what steps one can take to protect consumers from any harm that use of high-cost credit may cause. Drawing on the experience from the credit cards market, it will also consider long-term use of high-cost credit services and what one can do to ensure that consumers are not trapped in a long-term cycle of high-cost debt.
The FCA will also be looking at specific products in greater detail in its future work. These are rent-to-own services, home-collected credit and catalogue credit where the FCA is aware of particular concerns.
Link to publication